Last week’s sudden rally by the euro vs dollar was a combination of end of year profit taking – the dollar lost over 11% from August to November against the euro – and weak durable goods numbers on Wednesday. Neither move is predictive of market opinion for the New Year.
I have said in the past that despite ECB rhetoric a strong euro is causing problems across euroland and if the euro does attempt another run at 1.50 then political intervention will definitely occur. With the monthly charts showing an upthrust and hanging man political intervention may not, in fact, be necessary.
The only data out today is the important US Existing Home Sales. Forecast is for the same as previous. A higher figure would have a positive effect on the dollar currency because large purchases tend to be made by consumers that are optimistic and confident in their financial position. Home sales also trigger commissions for real estate agents, and often home owners will purchase goods such as appliances and furniture shortly after purchasing a home. Traders watch this report closely as it’s the month’s first demand-side housing indicator to be released.